The final phase is going to be 2000 people, which is small even for a town, or even for a midsize real estate project inside a city. Calling it a city just feels ridicolous.
Cool, but that's not the argumentation you started off with.
This other argument I do agree with, and more importantly, it fails to qualify as one even according to Japanese administrative definitions (would need to have 50K+ residents). Which I think is the actually important bit, if we want to establish the labeling as misleading.
Apartment blocks are typically in the hundred to a few hundred resident range around the world, only really high density developments will crack the thousand residents bar. So to liken it to one is a bit disingenuous in its own right, just the other way around.
This list of largest hotels ends at 28. The 28th largest has 3000 rooms.
https://en.m.wikipedia.org/wiki/List_of_largest_hotels